Hedge Fund’s GM Plan Gives Hedge Funds a Bad Name


What exactly is the purpose of GM?

If your answer is “to manufacture and sell automobiles” then you obviously haven’t been listening to David Einhorn, whose hedge fund, Greenlight Capital Inc., owns 13.2 million shares (0.88 percent) of the company’s stock, according to Bloomberg. In Einhorn’s view, it would appear, General Motors Co. exists to “unlock value” for shareholders like himself, while getting its dividend to be “respected by the market.”

GM’s essential problem, as he put it in a slide deck posted on Greenlight’s website, is that GM’s price-to-earnings ratio is a suboptimal 5.6 — the lowest among the S&P 500 — while its dividend yield of 4.4 percent is high relative to the market. In other words, the market is not giving the company credit for its high dividend — and is undervaluing GM’s shares…

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